The vast majority of law firms have made a profit since March, showing that predictions the pandemic would wreak havoc in the profession have not come to pass, according to new research.
Almost 50% of firms reported either ‘no’ or a ‘minor’ impact on their fee income as a result of Covid-19 in December, a dramatic improvement from May, when just 14% of firms said this.
However, there were redundancies and debts have increased.
In December, only 9% of firms said the pandemic was still having a major impact on fees, down from 38% in May.
Accountancy group MHA surveyed 100 firms of all sizes in May and 87 in December.
Although a majority still reported a decrease in fee income in December, 91% made a profit since the first lockdown in March. Of them, 18% reported profit growth of over 20% between March and December.
In addition, the percentage of those reporting drops in fee income of over 20% fell from half in May to 9% in December.
Karen Hain, head of professional practices at MHA, said: “These results demonstrate that legal firms across the UK have been able to adapt their commercial operations in the second half of 2020, and overcome the challenges brought by Covid-19.
“The wildly pessimistic expectations many of us had at the beginning of the first lockdown have thankfully not come to pass and profits and legal fees have now stabilised and even increased for many firms.
“Even though law firms generated lower fee income since March, many made immediate decisions to reduce expenditure, generating additional profits.”
Government support also played a role, with 87% of firms polled in May using the coronavirus job retention scheme.
The survey recorded that 58% of respondents adapted their strategic approach in response to Covid, such as by revising their service offering and office locations, reducing expenditures and staff numbers, since summer.
While 53% of firms made redundancies between March and December, 73% recruited new members of staff in the same period. “The majority of redundancies were made to support staff and across non-profit making areas of businesses.”
By December, three-quarters of firms were expecting staff to spend either three days or fewer in the office. Remote working did not negatively impact on working hours, with 63% of businesses seeing an increase in productivity.
Ms Hain added: “Looking ahead, 2021 offers firms an opportunity to continue to reorganise, streamline and go forward as a leaner and fitter business, placing a greater emphasis on employee welfare, particularly on how and where they work…
“Whilst the results of the survey are promising, we shouldn’t lose sight that cash remains king. Debts due from clients has disappointingly increased and it is imperative that firms do not lose the benefit of the improvements in hours logged, expenses reduced, and better profits, by not collecting their unpaid bills faster.”